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ENTREPRENEUR CARVES NAMING RIGHTS NICHE

By Donna Mitchell

Gary Sudhalter, CEO, Corporate Naming Rights.

Not long after The Mills Corp.’s groundbreaking deal to brand one of its regional malls with a corporate name, a Maryland company set up shop to establish a naming rights niche business in the United States.

Corporate Naming Rights (CNR), founded in March of 2000 by entrepreneur Gary Sudhalter, is now the only independent negotiator of corporate branding privileges for shopping centers. With one deal in the works and four more on the way, Rockville, Md.-based CNR is hoping to change the panorama of U.S. shopping centers.

The idea is to outfit malls in North America with the names and logos of major corporations, allowing a company to promote its brand and merge its corporate identity into a mall’s existing title.

Developers who own the malls would partner with the corporate sponsors, who would pay for the naming rights. Mall developers would be able to tap a new revenue stream without having to do anything extra. Above all, said Sudhalter, who is the company’s CEO, shoppers benefit from promotional goods and services provided by the corporate sponsor.

It’s been done before overseas. London’s historic Trocadero building on Picadilly Circus was branded the Pepsi Trocadero about three years ago. And Coca-Cola has its name on several Playland children’s amusement centers worldwide, said Stan Eichelbaum, SCMD, president of Marketing Developments, a Cincinnati-based consulting firm.

The Mills Corp., an Arlington, Va.-based developer of value megamalls, first realized the idea in North America last year. Mills negotiated its own corporate naming rights agreement with Riverwoods, Ill.-based Discover Financial Services, whose credit card is recognized as the preferred charge card at Mills centers. In a 10-year, $10 million agreement, the REIT in November will open Discover Mills, an Atlanta-based regional mall that should cover 1.5 million square feet.

In November, CNR signed with Chicago-based shopping center owner McCaffrey Interests to brand a planned 750,000-square-foot regional mall in the cultural and commercial hub of downtown Minneapolis. CNR is in talks with up to 10 blue-chip corporations for that project, said Juan Cameron, McCaffrey’s vice president of development, who as of press time in March said the deal was still being worked on.

CNR is currently pursuing pacts with “the largest national developer of regional malls,” said Sudhalter, who declined to elaborate on that statement. CNR is also working on agreements with major developers based in Chicago, Cleveland and an undisclosed Mid-Atlantic developer planning a 500,000-square-foot center in Washington, D.C.

Essentially, CNR will negotiate the naming rights between mall developers and corporations. When he founded CNR, Sudhalter signed an exclusive marketing agreement partnering him with David Cope, who secured naming rights for the MCI Center in Washington, D.C., home field of the NBA’s Wizards, and the PSI Net Stadium in Baltimore, where the Ravens host their NFL games. Cope is a strategic sales partner with CNR, and with his connections to a network of corporate sponsors, Sudhalter can concentrate on finding appropriate matches for the sponsors among mall developers.

Sudhalter said he expects his firm to arrange deals typically valued in the area of $20 million, with tenures of about 10 years. Individual agreements are not expected to approach the approximate $220 million price tag of the FedEx Field agreement. FedEx Field, a football stadium in Washington, D.C., was most recently called Redskins Stadium.

Even though the overall earning potential for corporate naming rights is unknown, market watchers like David Fick, a managing director at Baltimore-based brokerage firm Legg Mason Wood Walker, said the concept would best suit shopping centers with unique public images, and that could draw tourists.

Fick estimates that the nonlease income of shopping centers, including naming rights, may eventually grow to as much as 32% of a shopping center’s annual revenue.

CNR will try to match a corporation with shopping centers that draw its choice demographics, with input from the management of the properties.

And in light of diverse company profiles, from local outfits to national corporations, CNR will try to find sponsorships for shopping centers of all sizes. If a company’s demographics call for branding a handful of strip centers dispersed through a target area, CNR can accommodate that, too.

“We will look at a mall, and its image, and make sure we pick sectors that make sense to partner up with it,” Sudhalter said.

Sudhalter said he realizes that the concept may take some adjustment, especially if a locality has an affinity for an established shopping center. For that reason he expects to broker a majority of the agreements for malls under construction, but expects standout centers, like the Mall of America in Bloomington, Minn., to attract juicy bids for sponsorships.

The promotions will include interior and exterior signage that conform to stipulations from local authorities, logos on shopping bags, Web site marketing, and television and radio advertisements, Sudhalter said.

But how did the corporate branding idea evolve from sports arenas to include shopping centers? The 36-year-old Sudhalter culled the concept together from three observations: Unlike sports arenas that draw crowds sporadically year-round, shopping malls consistently attract people every day of the year; a vibrant economy means that corporations are willing to dedicate huge sums to promote their brands; and companies are willing to pay for an easy commodity — their name on existing structures.

CNR is the first company to break into this niche market as an independent negotiator of naming rights. But it may soon get competition from Mills itself, which negotiated the Discover deal.

“We are looking at this niche business. We may provide an outsource service for other developers seeking naming rights for their malls,” said Mark Rivers, an executive vice president for Mills.

In keeping with the spirit of making customers the ultimate winners of corporate naming rights, Mills is considering a list of perks for shoppers at its planned Atlanta mall: a VIP lounge, valet parking and cash-back incentives for using the Discover credit card. Even merchant occupants may reap benefits from the co-branded atmosphere, said Rivers.

Sudhalter still sees value in his company.

“I’m not sure every real estate developer makes it part of its core business to find sponsors. Why not have someone spending their full-time efforts to do that for them?” he said, noting a warm reception to his idea while mingling with attendees at the ICSC Spring Convention in Las Vegas last May.

“People loved the idea — as long as the profile of the sponsor complements that of the shopping center.”

 

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